For a landlord, collecting a tenant's security deposit is the best way to protect yourself from lost funds like unpaid rent. A security deposit serves to protect the landlord if the tenant breaks or violates the terms of the rental agreement. However, like most states, California has its own rules and regulations that dictate how security deposits must be handled. As a landlord, it’s important to be familiar with these laws.

California security deposits have many benefits, and collecting them from your tenants can help you cover unexpected costs if you find yourself in any of the following situations:

  • Your tenant fails to pay their utility bill.
  • There are excessive cleaning costs due to the tenant leaving the property in a state of extreme uncleanliness.
  • Your tenant fails to pay rent or has an excess of rent owed.
  • Your tenant causes excessive damage to the property.

Want to know more about the law regarding security deposits in California? Keep reading for a comprehensive overview of these laws.

Your Guide to Security Deposit Laws in California

California Security Deposit Limit

According to the laws in California, there is a limit to how much a landlord can charge a tenant for high security deposits. In the case of a furnished residential property, the landlord can choose to charge up to three month's median rent as a maximum security deposit. In the case of an unfurnished residential property, landlords may charge up to two month's rent for security deposits.

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However, there are some exceptions to the security deposit law regarding month's rent. If the tenant owns a water bed, the landlord can choose to increase the limit security deposits to cover an extra amount equivalent to the cost of half of one month's rent. If the tenant is an active service member, then the landlord must limit security deposits to one month's rent lower than the typical month's rent standard.

However, this is not the case if the service member tenant has a poor rental history or the rental unit is shared with at least one tenant who is not a service member, not including spouses, children, or domestic partners.

When it comes to the law on security deposits in California, tenants must always have the opportunity to receive a refund from landlords. According to the California landlord tenant laws, it is prohibited for a lease agreement to include any clauses that make security deposits non-refundable.

Storing a Security Deposit in California

While some states have specific regulations regarding if a landlord holds a security deposit in a bank account, California does not have any such rules.

Written Notice After Receiving a Security Deposit

California landlords are not legally obligated to provide their tenants with a written notice after the receipt of the security deposit.

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Reasons to Deduct Funds from a Security Deposit in California

California law regarding security deposits have a specific list of circumstances in which a landlord can use the security deposit from their tenants. Some common reasons include:

  • Unpaid monthly rent. (tenant may have to pay interest or a fee)
  • Covering the cost of repairs for excessive damage that was caused by the tenant (this does not include normal wear and tear of the property).
  • The costs of cleaning the property after a tenant has moved out. At the end of their tenancy, the renter should ensure that the rental unit is in the same state that it was upon their move-in.
  • Restoration costs are detailed in the lease or rental agreement.

Keep in mind that as a landlord, you cannot withhold your tenant’s deposit for damage caused by normal wear and tear during the lease term. Ordinary wear and tear refers to any damage to the property that occurs naturally from using the property for its intended purpose.

Examples of normal wear and tear include things like loose door handles, fading wall paint, or the failure of an appliance that had deteriorated over time from proper use. Only the cost of repairs for damage that was caused to the property by abuse or neglect exceeding normal wear and tear can be deducted from the security deposit by landlords.

Walk Through Inspection

An initial inspection of the property helps the tenant to be aware of any issues in the property prior to moving out, giving them an opportunity to fix the problem before the end of their tenancy and reduce the amount that may be deducted from their security deposit.

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If the landlord intends to inspect the unit, they must notify their tenant of the walk through within a reasonable time, no earlier than two weeks before the end of the lease.

If the tenant waived their right, they are allow to skip the initial inspection, but if they wish to have one done, then they must receive an itemized statement of deductions due to damage or cleaning.

Security Deposit Refunds

Once the end of the tenancy has arrived, the landlord has 21 days to return the security deposit to the tenant. If any deductions were made, then the landlord must include an itemized statement.

If the landlord wrongly withholds the security deposit or a landlord fails to deliver the owed funds back to the tenant within the provided time frame, then the tenant may file legal forms like a claim with the Small Claims Court of California.

If the small claims court finds that the landlord has acted unreasonably regarding the return of the deposit, then the landlord could be required by the small claims court to pay two times the amount of the security deposit in damages.

Change in Ownership of the Rental Home

What happens when a landlord decides to sell or change ownership of the property during the lease? In this case, the landlord has two options:

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  • The landlord may transfer the tenant's deposit over to the new owner of the property and provide a receipt to the tenant
  • The landlord may return the security deposit to the tenant as they would at the end of a rental agreement.

Before the transfer of ownership takes place, the landlord must decide which option they wish to choose and inform the new owner of their decision.

Hire a Property Management Company to Help

Now that you know a little bit about security deposit laws in California, you can protect yourself from unexpected costsall while avoiding potential security deposit disputes or evictions with your tenants.

If you have any more questions regarding California’s landlord-tenant laws or any other aspect of managing your rental property, contact JTS Property Management today!

Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.